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taxpayer’s level of education is a relevant factor. See
Niedringhaus v. Commissioner, supra at 211; Stephenson v.
Commissioner, 79 T.C. 995, 1006 (1982), affd. 748 F.2d 331 (6th
Cir. 1984).
Although respondent must prove an underpayment of tax in
support of the fraud penalty, respondent’s burden is met here by
proof of unreported income. An underpayment will exist where
unreported gross receipts are not exceeded by costs of goods sold
and deductible expenses. In establishing the underpayment, the
Commissioner may not simply rely on the taxpayer’s failure to
prove error in the deficiency determination. DiLeo v.
Commissioner, 96 T.C. 858, 873 (1991), affd. 959 F.2d 16 (2d Cir.
1992); Parks v. Commissioner, 94 T.C. 654, 660-661 (1990); Otsuki
v. Commissioner, 53 T.C. 96, 106 (1969). However, upon clear
proof of unreported receipts, even in a criminal case, the burden
of coming forward with offsetting costs or expenses generally
shifts to the taxpayer. See Siravo v. United States, 377 F.2d
469, 473-474 (1st Cir. 1967); Elwert v. United States, 231 F.2d
928, 933 (9th Cir. 1956).
Petitioner stipulated that he had unreported gross receipts
for all 3 tax years. Petitioner has failed to show that the
receipts were offset by deductible costs or expenses. As a
result, it is established by clear and convincing evidence that
petitioner had an underpayment of tax for each of the years.
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